Active Practice Updates JUNE 2012 <<Company File Name>> <<PDF Description 2>>Company car taxation“Everything in life is somewhere else, and you get there in a car.” Business UPDATEE. B. WhiteCompany cars remain an important tool in The taxable value of the benefit remains standard value of £20,200. This chargerewarding, attracting and retaining staff. up to a maximum of 35 per cent of the list is based on the same CO2 car benefitIt therefore comes as no surprise that the price of the car when first registered. A percentages referred to above.Government views the provision of company common mistake is for taxpayers to assumecars by employers to their employees as a the calculation is based on the second hand There is no fuel benefit charge for vehicleslucrative source of revenue for the UK. purchase price or the depreciated value of the propelled solely by electricity. car, which could yield a much lower benefit.With the UK Government also committed to Employee contributionslowering CO2 emissions, this guide seeks It is important to note that the list price includesto explore the company car tax rules, the the full cost of the car, car tax (if applicable), Where the employee contributes to the costupcoming proposed changes and how Value Added Tax and delivery charges. of the car, the figure for list price is reducedtax legislation is being used to encourage There is no cap on the list price of the car for accordingly on a pound for pound basis, tobusinesses to use more environmentally-friendly calculating the benefit. The list price of most a maximum contribution of £5,000.vehicles. A review by both employers and accessories must be included whether fitted By contrast it is ‘all or nothing’ for the fuelemployees of their company vehicle(s) may be when new or subsequently. benefit charge, thus the full tax charge onappropriate. Please contact us for advice. Cars running solely on diesel fuel are currently the value of the benefit is due unless the employee reimburses all private fuel costs.Company car benefit subject to a 3 per cent supplement, subject to the 35 per cent cap mentioned above. HM Revenue & Customs has publishedThe provision of a company car is normally Employees and directors who are provided advisory fuel-only rates which will beconsidered a taxable benefit for an employee with a company car that is propelled solely accepted either for employers reimbursingor a director. The company car benefit charge by electricity will not have to pay tax on employees for the cost of fuel for businessfor a full year is obtained by multiplying the the benefit. Additionally, cars first registered mileage, or for employees reimbursingprice of the car for tax purposes (in most before January 1998, for which there are employers for the cost of fuel for privatecases, its list price plus accessories less capital no reliable CO2 emissions data, is taxed mileage in a company car. Alternative ratescontributions) by the ‘appropriate percentage’. according to their engine size. may be negotiated, for example when it is necessary for the performance of his or herThe ‘appropriate percentage’ used to Fuel benefit charge duties that an employee uses a vehicle withcalculate the benefit is based on the level ofCO2 emissions. The benefit charge is then Where the employer also pays for any fuel a typically higher fuel consumption rate.subject to tax at the effective tax rate of each used privately by the employee, there is The advisory fuel-only rates are reviewedindividual. Employers pay Class 1A National an additional benefit charge applied to a four times a year on 1 March, 1 June, 1Insurance contributions (NIC) on the benefit at September, and 1 December. Please contact13.8 per cent. us for the most up to date rates.18 Hyde Gardens www.plummer-parsons.co.ukEastbourne BN21 4PT01323 431 200 firstname.lastname@example.org
Company Car TaxationTax payable Nor is there any charge on fuel for private use provided to such employees. ThisIncome tax at the basic, higher or additional rate is chargeable depending on the employee’s concession is now less favourable given therate of pay. The tax is usually collected under the PAYE system by appropriate adjustment of the personal allowance has steadily risen toemployee’s tax code. £8,105, whilst the ‘lower paid’ employee limit has remained unchanged.For the benefit to be attractive, the employee must pay less in extra tax than it would cost themto run their own car out of their taxed income. Company Cars – PostThese are examples of the 2012/13 tax costs to an employee of a company car: 2012/13 Petrol Diesel Many employees and employers will see Applicable List price CO2 emission g/km Car Fuel Car Fuel an increase in their respective income tax tax rate and NIC bills in the coming years. Some of the announcements already made are listed 20% £18,000 200 £1,116 £1,252 £1,224 £1,374 below. 40% £18,000 200 £2,232 £2,505 £2,448 £2,747 • In 2013/14, the maximum appropriate 50% £18,000 200 £2,790 £3,131 £3,060 £3,434 percentage at which 10 per cent is charged reduced from 99g/km toCompany vans 94 g/km. • From 2014/15, the appropriateThe taxable benefit for the unrestricted use of company vans is £3,000 plus a further £550 of percentage for cars emitting more thantaxable benefit if fuel is provided by the employer for private travel. Home to work travel in a 75g/km of CO2 will be increased bycompany van is not deemed to be private use. 1 per cent to a maximum of 35 per cent in the 2014-15 tax year.The tax payable on the use of a company van ranges from £600 up to £1,775 p.a., and theemployer’s Class 1A NIC payable ranges from £414 to £489.90 p.a. • The 0 per cent and 5 per cent rates for low emission cars will be abolishedBusiness use of an employee’s own car from 2015/16. The appropriate percentage bands will increase byIt is normal practice for employees to be reimbursed per mile for business use of their own cars. 2 per cent. Such cars will have a percentage of 13 per cent (16 per centA statutory system of tax and NIC free mileage rates applies for business journeys in for diesel). In addition, the scale isemployees’ own vehicles: extended from 35 per cent to 37 per cent. Cars and vans • From 2016/17, the 3 per cent On the first 10,000 miles in the tax year 45p per mile premium for diesel engines is removed. On each additional mile above this 25p per mile The appropriate percentage bands will again increase by another 2 per cent. Motor cycles 24p per mile Such cars will have a percentage of Bicycles 20p per mile 15 per cent.Excess mileage payments are reportable on forms P11D and taxed accordingly. Note thatthe lower rate for more than 10,000 business miles only applies to income tax. The NIC rate Compliance Pointsremains at 45p for any number of miles incurred. Accurate and up-to-date records of all business mileage undertaken in privateIf an employee travelling on business carries fellow employees as passengers, they may be vehicles must be maintained at all times. Inreimbursed a further 5p per passenger tax free provided it is a business journey in respect of the case of company cars, all fuel receiptsthe passengers. No claim can be made if the employer does not pay passenger payments. should be retained as proof of actual costs incurred. Employers should ensure fullTax-Free Benefits pool car mileage records are kept to avoidCar parking unexpected tax bills in the event of a PAYEThe provision of a car parking space at or near the employee’s place of work is not an inspection.assessable benefit. In order to prevent too little tax beingPool cars deducted at source on the provision ofThere is no tax for using a pool car. This is one where private use is merely incidental to the annual benefits, it is important to verify yourbusiness use, and it is not normally used by one employee to the exclusion of all others. Please personal tax code periodically to ensure thatnote that a pool car must not normally be kept overnight at or near an employee’s home. the correct benefit is being applied.‘Lower paid’ employeesThe provision of a car for an employee other than a director who is paid at a rate below£8,500 per year (including the value of benefits) does not attract any charge to income tax.